The Anheuser-Busch merger with InBev—and its potential impact on everything from distribution contracts to product mixes—has been the story of the year in the beer world. But the merger has diverted attention from other matters, including a leveling off of the imported beer segment from its heady days earlier in the decade.
Last year, consumption of imported beer declined by 1.2 percent, the first drop since 1991, according to preliminary data from Cheers parent, The Beverage Information Group. This is quite a contrast from the mercurial 21.2 percent growth rate the category had been experiencing since 2004.
Much of the fall off can be attributed to category leaders Corona Extra and Heineken, which lost 3.5 and 4 percent, respectively. The declines stemmed from the weak dollar, reduced ad spending and price increases in the case of Corona. But if these two brands were excluded from statistics, imports would follow the overall trend toward a soft landing. The segment experienced a 12 percent growth rate in 2006, followed by a 2.8 percent increase in 2007. Last year was the first year the segment declined.
Still, imports are selling well in restaurants and bars. How long the momentum will continue remains to be seen. Some operators say that much of their beer traffic now is coming during happy hour. Others believe that, compared to wine and cocktails, beer represents a great overall value and therefore will do well in the down economy.
“The end of 2008 was hard to read because of the way the economy sunk starting at mid-year,” says Kip Snider, corporate beverage director for 23-unit, Irvine, Calif.-based Yard House, which features 3,000 handles and 480 beer brands chainwide. Snider has not seen a shift in consumer preferences. But he has noticed that the slumping economy is affecting purchasing patterns. “The biggest difference I see is that they’re coming in earlier and buying it during happy hour. I haven’t seen a decline in [import volume] yet.”
Whether or not the situation deteriorates depends on the
future of the overall economy. “Will the customer that’s stepping up from a domestic to an import or a craft beer have the money to continuously spend?” asks Snider. “If price points hold, things will be fine. But if distributors continue to raise their prices, I think you’ll see people trading down later this year because they won’t be able to afford it.”
Kevin Settles, president of the Bardenay in Boise, Idaho, sees rising prices affecting domestic craft brews more than imports. With imports, higher prices are more palatable to American consumers, especially in the Pacific Northwest. “Customers may be willing to pay more, particularly for the Belgian beers, but not for something local that appears to be more expensive than their peers,” he says.
Snider predicts that rising prices on the part of domestic
specialties may start to reverse the paradigm that has been building over the past decade of high-end beer drinkers preferring domestic craft brews over imports. “It’s going to start to even out, particularly with the increasing availability of imports from all the mergers,” he says, referring to the Anheuser-Busch/InBev and Miller/Coors realignments. “The more they’re available, the more interest there is.”
Crafting a Winner
The term “better beer” first was popularized by Boston Beer founder Jim Koch, maker of Samuel Adams Boston Lager, in an effort to group domestic crafts with imports in the collective consciousness of the American beer drinker. The high end has grown to include another, much smaller segment, however: imported craft beer.
“The term ‘better beer’ invokes a subjective,” says noted beer consultant, Stephen Beaumont. “But make no mistake. Craft imports, primarily from Belgium, but also from the U.K., Germany and the Czech Republic—and then everywhere else to a lesser degree—have been making a massive impact. This impact is disproportionate given their small size. Let’s not kid ourselves, the whole segment put together doesn’t add up to Heineken or Corona. But for their size, their growth echoes what’s happening with domestic crafts.”
Beaumont points to two Belgian brands, Affligem, owned by Heineken, and Leffe, owned by A-B InBev, as examples of smaller craft imports that have successfully built a following in North America. “There are many small Belgian breweries that export more beer than they sell in Belgium, brands like Dupont and Fantôme,” he says.
Bardenay’s Settles notes that his customers have been “maintaining” their interest in Belgian beers. He is optimistic about the category moving forward. “I think that crafts and imports are going to have a good year in 2009.”
In response to the growing demand for these craft micro-brews, “micro-importers” have begun springing up. “These include Shelton Brothers, which has a monstrous portfolio of beer they import in ridiculously small quantities—brands like Merchant Du Vin,” says Beaumont.
He points to a relatively new importer, Brooklyn, N.Y.-based 12 Percent, as an example of this new breed of microimporter. “He’s bringing in stuff in such small quantities from breweries. These are really niche, kind of hobby breweries. Right now, his entire district is New York City.”
Many chains are getting in on the act. Disney-owned ESPN Zone recently asked Beaumont to help tweak the beer portfolio at its eight locations. Duvel, among others, made its way onto the menu. But getting ESPN Zone guests to try craft imports has been a struggle.
“The staple imports, Corona, Guinness and Stella Artois, continue to sell well,” says Weston Spiegl, manager of standards and beverage for ESPN Zone. “Outside of these staples, we’re not seeing our guests venture too far from the domestics. The U.S. continues to brew such great beer, it’s hard to convince somebody to move to an import at a higher price. Moving people away from our great domestics or the staple imports and into Paulaner, Chimay or Duvel has been challenging.”
Beaumont believes craft imports will help the chain close that gap. “Duvel USA is going to bend over backward for ESPN Zone,” he says. “When you get into the craft side of export brewers, there’s only so much money they can spend, so they’ll do something like glassware. Glassware is particularly important for imported brands. It’s a point of differentiation. Even the small guys try to get glassware into licensee accounts as much as possible.”
Charge of the Light Brigade
For years, the terms “light” and “imported” seemed at opposite ends of the beer spectrum. People turned to imports and crafts for strong flavors. But these consumers were not usually calorie-conscious, says Boston Beer’s Jim Koch. “Sometimes they choose a high-end light beer, but it’s not the prevailing profile as it is with the domestic premium category. Lighter refreshment is the dominant taste profile.”
Koch says there now is a shift going on at the high end, with more consumers discovering the flavor and taste of better beer. “They want to continue to get that same flavor and taste in a light beer. They are staying within the light segment of the higher end. It’s part of the long-term, continued growth of high-end beers in general.”
Dave Alexander, owner of The Brickskeller and RFD, both in Washington, D.C., does not believe that light imports are ever going to command a dominant market share. But they have growth potential. “It’s not so much drinking healthy as it is drinking less unhealthy,” he says. “You already see Heineken, Corona, Tecate and all these other guys making light products. That tells you they see light imported beer as a viable style. These guys don’t casually decide to produce a different style. The sales are there.”
Alexander says the opportunity to grow the foreign import segment was, in part, created by American domestic brewers. These companies “did a great job” removing whatever stigma may have been attached to the light beer segment among male consumers. “It’s bound to have a positive influence on imports.”
In addition to serving a wide variety of beers, Alexander and his wife, Diane, emphasize “cuisine a la bière”—cooking with beer and pairing foods with beer—at their RFD location.
With light beer the dominant segment in the domestic beer category, many imported brands have launched their own light initiatives in an effort to get the light beer drinker to trade up. The effort appears to be paying dividends. Three of the top 11 import brands are light offerings. According to The Beverage Information Group, these are Corona Light, Heineken Premium Light and Amstel Light. Do not look now, but another major light import brand, this one from A-B InBev, soon may be flowing from a tap near you.
“You may see a light version of Stella Artois,” hints Beaumont. “It’s already being sold in the U.K. and in Canada. Whether they’ll take the plunge and try and bring it into the United States, and how they’ll do it, are big questions. It’s called Stella Légère, which is French for light, and that’s never going to fly in the U.S. I don’t think it’s a huge success in the U.K., but it’s doing better in Canada.”
Whether Stella makes the leap or not, light and specialty imports will continue to give operators reasons to look beyond the border.
Bob Phillips, a long time beer observer and the former editor-in-chief of Beverage Aisle magazine, has written for publications such as Progressive Grocer, Newsweek and Inside Sports.
Mixed Bag (online only)
Imported beer shrinks as a category as leaders Corona and Heineken have a rough year.
Enhancing the Experience (online only)
Operators get creative when selling beer.